Mortgage burning may have been a prevalent practice during the 20th century, but there’s a lot more to consider when it comes to contemporary mortgage planning. Approximately 14% of home buyers in 2016 financed their entire home purchase with a mortgage, which they may be paying for a long time to come. But if you’re in a financial place where you feel secure, you may even consider paying off your mortgage early. But is paying off your mortgage early really the best call? We’ve compiled a short list of pros and cons for you to consider.
When You Should Pay Off Early
Sheryl Garrett, founder of the Garrett Planning Network, says that, aside from the obvious financial benefits of living without mortgage planning, getting it over with can help make homeowners happier.
“You would never believe how fabulous and freeing it feels to pay off a mortgage,” Garrett says. “The psychological benefits are enormous.”
But that’s not to downplay the financial benefits of paying off a mortgage. Whether you’re nearing retirement or you simply want to plan for the future, here are a few pros of getting that mortgage out of the way:
- Leaving More to Your Family
When you own your home outright, you’re able to leave it to your surviving family members. Otherwise, they may be forced to sell the house.
- Protecting Yourself From Bankruptcy
Your home is usually exempt from judgment if you’re sued, but owning it outright can actually give you some protection from bankruptcy, as well.
- Solidifying Your Assets
Keeping a mortgage and investing in a high rate is a risk. What many homeowners fail to see is that mortgage interest is concrete, while other investments may not be.
When You Shouldn’t Pay Off Early
The biggest issue for many people who consider paying off their mortgages early is tax-related. Paying off your mortgage early often comes with delving into your nest egg. Garrett offers perspective on this, as well.
“The longer people can defer touching their untaxed nest egg, the better off they are,” Garrett says.
Other reasons to keep your mortgage payments include:
- Keeping Your 401(k)
Retirement will supply you with a mixture of Social Security benefits and savings for income, but paying off your mortgage could require dipping into your hard-earned savings. It may even force you to stop contributing to your 401(k) altogether.
- Increasing Leverage
Borrowing over long periods of time at a low interest rate is definitely favorable. In fact, it may leave you with more wealth at the end of the day.
How Can Platinum Lending Services Help?
Whether you’re a first time home buyer or you’re already working with a conventional mortgage, the Platinum team can help you. Mortgage planning is a tricky business, and consulting one of our skilled team members can help you make the right decision for your home and your future.